Shareholder‐ Versus Stakeholder‐Focused Japanese Companies: Firm Characteristics and Accounting Valuation*

Recent research has found that the value‐relevance of accounting variables depends not only on whether a country's accounting rules are code‐law oriented or common‐law oriented, but also on the reporting incentives created by the legal and business environment in which a firm operates. Therefore, for example, the earnings of firms in some countries with common‐law oriented rules but with code‐law incentives have more code‐law‐type characteristics. We further this research by examining whether this is true for firms facing the same accounting regime and institutional environment but different stakeholder‐related incentives. We find significant stakeholder‐related incentives across 23 Japanese firms listed in the United States and 23 Japanese firms not listed in the United States that are matched by industry and size. Although these firms face the same institutional environment and the same accounting regime, consistent with the differences in stakeholder‐related incentives, the earnings and book values of the firms listed in the more shareholder‐oriented U.S. markets have significantly more explanatory power for market value than those for firms not cross‐listed in the United States. These findings are unaffected by whether the reports are based on consolidated or parent‐only accounting or whether they are based on U.S. or Japanese GAAP, emphasizing the potential influence of reporting incentives at all levels on the effect of standardization, conversion, or harmonization of accounting methods globally.     

Coordinating Effort under Team‐Based and Individual Incentives: An Experimental Analysis*

This paper explores the behavior of workers in an environment where it is efficient to engage in the mutual exchange of help. Experimental data show that output and workers' payoffs are greater under team‐based incentives than under individual incentives in an environment where coordination is difficult. However, when the environment is more conducive to coordination (that is, a setting where agents interact repeatedly), output and payoffs are greater under individual incentives. Manipulation of the amount of mutually observable information provides evidence that team‐based incentives, relative to individual incentives, create a more difficult coordination problem for workers and that cooperation requires a richer informational environment.     

Real Incentive Effects of Soft Information

Both soft, noncontractible, and hard, contractible, information are informative about managerial ability and future firm performance. If a manager's future compensation depends on expectations of ability or future performance, then the manager has implicit incentives to affect the information. We examine the real incentive effects of soft information in a dynamic agency with limited commitment. When long-term contracts are renegotiated, the rewards for future performance inherent in long-term contracts allow the principal partial control over the implicit incentives. This is because the soft information affects the basis for contract renegotiation. With short-term contracts, the principal has no control over the basis for contract negotiation, and thus long-term contracts generally dominate short-term contracts. With long-term contracts, the principal's control over implicit incentives is characterized in terms of effective contracting on an implicit aggregation of the soft information that arises from predicting (forming expectations of) future performance. We provide sufficient conditions for soft information to have no real incentive effects. In general, implicit incentives not controllable by the principal include fixed effects, such as career concerns driven by labor markets external to the agency. When controllable incentives span the fixed effects of career concerns, the latter have no real effects with regard to total managerial incentives—they would optimally be the same with or without career concerns. Our analysis suggests empirical tests for estimating career concerns that should explicitly incorporate noncontractible information.     

CAPITAL STRUCTURES IN EMERGING STOCK MARKETS: THE CASE OF HUNGARY

This paper studies developments in the Hungarian capital markets during 1992–95 and investigates the determinants of the capital structures of companies listed on the Budapest Stock Exchange. Hungarian companies had very low leverage ratios. Empirical findings indicate that the negative relationship between leverage and proportion of tangible assets was primarily caused by the lack of long‐term debt financing. The relationship between leverage and the size of the company provides some indication of the importance of trade credits for the companies. The more profitable companies had less debt than less profitable ones. This is attributed to the firms’financial incentives aggravated by the segmentation of Hungarian credit markets and credit rationing within the financial environment. Manufacturing firms and firms with the state among their major shareholders enjoyed higher levels of debt financing relative to other companies.     

制度维度：企业家才能配置的选择性方向分析

鲍莫尔认为，制度激励结构的改变会影响企业家才能在生产性和非生产性活动之间的配置。文章基于上述观点，从制度的维度，构建了一个关于企业家才能配置的价值方向选择与制度环境的模型，从而解释了企业家才能配置发生变迁的动因和条件，并且认为制度环境的变迁过程、力度强弱直接或间接影响着企业家才能配置的价值方向选择，只是不同时间和过程中的表现而已。因此，完善和构建有效、合理的制度环境是企业家才能配置的价值方向趋同于生产性活动良性循环的根本。     

Empirical information on beef production in regions of Namibia as an aid to restructuring the livestock farming industry along equitable lines

The paper considers the regional influence of prices and access to markets on beef numbers in Namibia, given the present inequalities, by using econometric analysis of time‐series data. This is relevant because Namibia is in a process of structural adjustment following independence in 1990. and in view of the livestock industry's importance in the Namibian economy. The results accentuate the role of access to markets in beef production in Namibia. Where access is severely restricted due to lack of infrastructure, such as processing facilities and adequate transport for example in the communal regions, beef producers do not act on price incentives, or cltmatological and ecological variables. However, beef producers with limited access to markets, mainly due to high transport costs, do react to environmental changes, but not to price incentives. Only producers with easy access to markets react to both environmental changes and price incentives. The major conclusion is that the present production and marketing structure in Namibia with respect to beef is probably not optimal. The results highlight the need for an overall policy which accounts for all related industries, producers, consumers and other relevant factors simultaneously.     

Sharing the Market or Getting Closer for a Fight? Strategic Reaction to Reduced Trade Costs

Electronic coordination links markets that have initially been separated by transport costs, which in turn raises competitive pressure and affects incentives to differentiate products. We analyze private and social incentives to invest in a repositioning of products in a heterogeneous goods duopoly with two spatially separated markets. We consider both price and quantity competition to be able to distinguish between digital and physical products, respectively. For low transport costs, firms want to enhance product differentiation as expected. However, if transport costs remain close to prohibitive levels, they have an incentive to reduce heterogeneity.     

Experience and Confidence in an Internet‐Based Asset Market Experiment

The experience effect in asset markets is one that was thought to be settled. As subjects gained experience with the interface and each other, they typically exhibit fewer instances of mispricing and at lower magnitudes. But questions regarding trading experience are not easy to address in the lab with the typical subject pool since the kind of experience one can typically generate in the lab is experience with the experimental environment itself—not with external environments. However, in virtual worlds asset markets are highly evolved, providing a subject pool with skilled and experienced traders that can be accessed via the Internet. This study compares experimental asset markets with participants recruited from virtual world trading groups to experimental markets with participants recruited from the virtual world at large. I further examine trader performance and trading behavior within markets. The findings indicate that asset markets with virtual world participants recruited from trading groups are more prone to exhibit bubbles than are markets with virtual world participants recruited at large. Within condition, experienced traders are less likely to follow fundamentals and more likely to engage in strategies that result in loss of earnings. Excess confidence is rejected as an explanation for this pattern, as confidence is found to be related to higher earnings and fundamental value trading strategies.     

Assessing Bettors' Ability to Process Dynamic Information: Policy Implications

Regulation is often employed to encourage the provision of readily interpretable, explicit information to betting markets in an effort to promote their efficiency. This approach is supported by a considerable volume of laboratory‐based research which suggests that individuals make poor judgments in the face of implicit, dynamic information. This article investigates to what extent horserace bettors, who have strong incentives to make good probability judgments, require the regulator's protection from such hostile information environments. In particular, we examine the accuracy of the subjective probabilities of bettors concerning 16,344 horses in 1671 races. We find that bettors are skilled in adopting effective heuristics to simplify their dynamic information environment and, even in the face of restricted information, develop well‐calibrated judgments using outcome feedback. A number of factors that help bettors to achieve good calibration are identified and the implications for market regulation are discussed.     

Student attitudes toward markets: Comparative survey data from China, the United States and Russia

Survey data are used to compare Chinese undergraduates' attitudes toward markets with those of American and Russian undergraduates.¹ Some similarities were found between Chinese and American students' attitudes, particularly a shared interest in material gain and belief in the importance of material incentives. There were also significant differences: Chinese students were less comfortable with market outcomes and more willing to support government intervention in markets than Americans were, and expressed more doubts about the character of business people than did their American peers. In a comparison with Russian undergraduates, Chinese students were less concerned about the fairness of market outcomes, but they were also more supportive of government intervention in the market. Russian students were more interested in material gain and more supportive of business than their Chinese peers. These results suggest that recent differences between China and Russia's economic performance are not simply explained by differences in citizens' attitudes toward markets or reform.     

The Effects of Biasing Performance Measurement Systems on Incentives and Retention Decisions

We examine a principal–agent setting in which the principal uses a performance measurement system for multiple purposes—to provide incentives and for retention decisions. The principal chooses the nature and extent of bias in the system, which determines whether the performance report is stringent, neutral, or lenient relative to the unobservable actual outcome. We show that when the report is used only for incentive purposes (an incentive role), stringency alleviates moral hazard. On the other hand, when the principal's objective is to minimize the cost from incorrect retention and firing decisions (a fit evaluation role), there is a demand for leniency. Surprisingly, however, we show that adding a fit evaluation role to a system serving an incentive role can accentuate the demand for stringency because stronger incentives can also indirectly improve retention decisions.     

Contests for Ranks: Experimental Evidence

We use experiments to analyze multiple dimensions of the relationship between rank incentives and individual performance. In our experiment (i) rank is defined as subjects' relative position in their group based on their performance in a real effort task and (ii) subjects' earnings are independent of their performance. We find that any rank incentive improves mean performance than no rank incentive, and this result is independent of the group size. In the large group, the mean performance increases strictly in all except at the highest rank incentive, but in the small group the mean performance increases weakly in rank incentives. Finally, the mean performance is significantly higher in the large than in the small group because of a higher “prestige effect.” In additional treatments in which we do not reveal the identity of the status‐prize winners, we find that average performance is identical to that in the baseline treatment without any status prizes. The last result signifies the important role that public revelation plays to enhance the strength of status. The results are important for managerial practices.     

Innovations in return transmission and performance comparison between the five biggest Euro area stock markets

This article presents an empirical analysis of integration and performance of the five biggest stock markets of the Euro area: France, Germany, Holland, Italy and Spain. This empirical analysis begins with the estimation of an EMU market model with time-varying beta coefficients, which is the basis for the subsequent estimation of the transmission of innovations and volatility between those markets. The present article compares the performance of those stock markets measured by time-varying Treynor ratios. Those ratios support the creation of a portfolio which explores the performance differences between those markets. The capability of this portfolio to exploit those performance differences is subject to evaluation by comparison with a benchmark represented by an equally weighted portfolio.     

Industrial policy in eastern Europe: The case of Hungary

This paper reviews western conceptions of industrial policy and discusses how they may be applied to an economy in transition such as Hungary. At present, Hungary envisages a “moderately active” industrial policy, though in practice it will be limited by Hungary's desire to conform to EC practices as far as possible, by the need to give firms clear incentives to adapt, and by budgetary constraints. The analysis of industrial competitiveness and structural change shows that Hungary entered the 1990s as an economy in severe disequilibrium, and that industry per se will not quickly return to its pre-1990 state. One of the most difficult tasks for industrial policy, therefore, will be to manage a process of structural change that will have differential effects both across sectors and between regions. While the best industrial policy is provided by means of a stable regulatory and legal environment for business and sound macro-policy, Hungary will need more than this in the medium term to overcome inherited structural imbalances in the presence of severely imperfect markets; e.g., the financial and labor markets.     

Spatial Equilibrium of Wheat Markets in Ethiopia

Abstract: Knowledge about the extent to which spatial markets are integrated is useful to assess the impact of liberalization policies on the performance of agricultural markets in the developing countries. In turn, this would help to guide subsequent interventions aimed at improving the performance of markets. Cointegration techniques provide an analytical framework to know whether markets are integrated, by making it possible to investigate the existence and magnitude of price transmission between spatial markets. This study tries to analyze the spatial equilibrium of wheat markets in Ethiopia by employing an autoregressive distributed‐lag modeling approach to cointegration analysis on wheat prices observed during the post‐liberalization period for the central wholesale market (Addis Ababa) and for a local market (Ambo). The major finding of a stable equilibrium relationship between the price series considered provides evidence of market integration. Since intervention in local markets is generally costly and less effective, the result suggests the possibility of targeting intervention at the central wholesale market level with the objective of influencing price dynamics in the local markets.     

A theory of gridlock: Strategic behavior in legislative deliberations

This paper studies compromise and inflexibility in political negotiations. It provides the first analysis of gridlock, a result in which politicians fail to agree on an ideal compromise but which most voters find preferable to the status quo. A multistage game is developed in which contending political blocs choose from hardline or compromise strategies. The outcomes—compromise, gridlock, or one party's ideal legislation—are a function of the incentives of political actors to cooperate or fight. The model illustrates problems in political markets that may occur when consumers are poorly informed.     

False Promise or False Premise? The Experience of Food and Input Market Reform in Eastern and Southern Africa

The literature on the effects of agricultural market reform in Africa is sharply divided and inconsistent. This article attempts to reconcile opposing viewpoints on the effects of food and input market policy reform in eastern and southern Africa. Drawing from studies of Ethiopia, Kenya, Malawi, Zambia, and Zimbabwe, we argue that a major source of the controversy stems from assumptions that countries have actually moved to a liberalized market environment. We find that many of the most fundamental elements of the reform programs either remain unimplemented, were reversed within several years, or were implemented in such a way as to negate private sector investment incentives. A framework is developed for explaining why some countries have been able to liberalize their food and fertilizer markets while others have not. These findings have implications for how donor assistance and policy-oriented research can more constructively contribute to an improved policy environment.     

民营企业董事会外部关联特征的非市场战略价值效应研究

国内外诸多研究表明,相比较于市场环境,非市场环境管理对于民营企业发展而言具有更为重要的战略意义.而在现代企业制度下,民营企业董事会因其外部关联特征承担着非市场战略管理职能,文章利用我国沪深两市经验数据实证检验了民营企业董事会政治关联、金融关联特征与非市场战略绩效的关系,研究结果总体表明,相比较于金融关联特征,民营企业董事会政治关联更有助于改善企业非市场战略绩效,但两者在提升各维度非市场战略绩效方面的表现各有差异.研究结论对于指导我国民营企业董事会建设以及提升非市场战略管理水平具有重要参考价值.     

Corporate Investment Incentives and Accounting‐Based Debt Covenants*

This paper studies the conditions under which accounting‐based debt covenants increase firm value in a setting that incorporates the conflicting incentives of shareholders, bondholders, and managers. We construct a model in which debt is needed to discipline managerial investment decisions despite endogenous compensation contracts. We show that accounting covenants increase value when (1) debt serves as a credible commitment to penalize poor investment decisions; (2) the firm faces other (exogenous) sources of uncertainty that can make debt risky despite good investment decisions; and (3) accounting information serves as a contractible proxy for firm's economic performance. In these circumstances, accounting covenants ensure that shareholders do not offer compensation schemes that would encourage bondholder wealth expropriation when the debt becomes risky. A covenant specifying a required level of accounting performance provides additional bondholder power when performance is low. An accounting‐based dividend covenant allows a disbursement to maintain investment incentives when performance is high without allowing dividend‐based expropriation. The optimal covenants depend on the reliability of accounting information, and the interaction between accounting performance and the different incentive conflicts provides new insight into the empirical literature on accounting‐based covenants.     

Evaluating the Relative Impact of Fiscal Incentives and Trade Policies on the Returns to Manufacturing in Taiwan, 1955–1995*

In the present paper, an integrated cash flow model is developed to examine the relative impact of tax incentives, financial subsidies, and macroeconomic variables on the profitability of industrial investments. It allows for the variables in the model to interact with each other. An application of the model is carried out for Taiwan, which has implemented a variety of fiscal incentives over the past 40 years. The principal policy conclusion is that trade and macroeconomic policies are much more important than income tax incentives or subsidized finance policies in determining the success of Taiwan's industrialization process. The effects of all of the fiscal incentives are found to be much smaller than those of the trade policies or the fundamental trends in macroeconomic variables such as the movement of the real exchange rate and the real wage rate.